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This month’s employment report was deeply disappointing, and would have been shockingly low if we didn’t get the heads up from the very weak ADP report on Wednesday. The rate of job creations slowed dramatically to just a total of 54,000, from 232,000 in April, and far below the 169,000 consensus expectation. Those expectations had already come down sharply in the wake of the ADP report.

Also the job creation totals for both April and March were revised lower. The unemployment rate inched up to 9.1% from 9.0% and both the civilian participation rate and the percentage of the population that is employed were unchanged. The median duration of unemployment rose to 22.0 weeks from 20.7 weeks. All in all an extremely weak report, and it is very hard to find any silver linings.

Men vs. Women

This recession has hit men harder than it has hit women. However, over the past year, things seem to be “evening out” between the genders, and this month both slipped back. In May, the unemployment rate for adult men (over 20) rose to 8.9% from 8.8% in April, but down from 9.9% as recently as November. It is down from 9.8% a year ago. A bit of the year-over-year decline is an illusion, though, as the participation rate for men fell from 74.4% a year ago to 73.6% in May.

On the other hand, the increase in the unemployment rate from April is also a bit of an illusion, as the participation rate rose from 73.4%. (for a fuller discussion of the importance of the participation and employment rates see Jobs Report In-Depth, pt. 1). The employment rate for men rose to 67.1% from 66.9% in April, and down from 67.1% a year ago.

For women, the unemployment rate rose to 8.0% in May, up from 7.9% in April, but down from 8.1% a year ago. The participation rate was 59.9%, it had been at 60.0% since January, but down from 60.5% a year ago. The employment rate fell to 55.2% from 55.3% in April, and is below the 55.6% rate a year ago.

For both sexes, there has been a real year-over-year improvement in the employment situation, but it is not as big as just looking at the unemployment rates would indicate. The falling participation rate means that the job situation for women deteriorated this month by more than the increase in the unemployment rate alone would indicate. Conversely, the deterioration for men was not quite as bad as it looks at first glance.

In the overall big picture, men have fared far worse than women in this downturn. There are two possible reasons for that. The first is that the industries that have been particularly hard hit in this downturn tend to be far more male-dominated than the industries that have skated though this recession more or less unscathed. The most glaring example of this would be the construction industry versus the health care industry (more on the industry breakdowns below).

The second explanation is that on average, women tend to still be paid far less than men do, and employers might be more prone to let their relatively high priced male employees go first before their cheaper female employees. The industry effect is probably the bigger one, but the two are not mutually exclusive and both might be playing a role.

Teenage Unemployment

Teens, regardless of gender have had a very hard time of it in this recession. Just go to a McDonald's (MCD) and you will see this for yourself. Normally the blemishes you see on the cashier's face are acne, not wrinkles and age spots as is the case now.

Things got a little bit better teens in May. The teen unemployment rate fell to 24.2% from 24.9% in April, and is down from 26.4% a year ago. The trend looks encouraging, but don’t get too excited about it, as it is mostly an illusion. The participation rate fell to 33.3% from 33.7% in March, and is well below the 35.4% rate a year ago. The percentage of teens who actually have a job fell to 25.2% from 25.3% in April, and is down from 26.1% a year ago.

While for the most part the earnings from teen jobs tend to go towards clothes from Abercrombie & Fitch (ANF - Analyst Report) and other teen clothing stores, for many it is a significant part of paying for college. Also, when teens work, they learn important job skills, such as the importance of actually showing up, and doing so on time. The extremely low levels of teens working is not a good sign for the future.

Breakdown by Race

Not surprisingly, Whites have a lower unemployment rates that do Blacks or Hispanics. The White unemployment rate was unchanged at 8.0% for the month, but is down from 8.8% a year ago. The participation rate was unchanged at 64.7% in May, though it is down from 65.3% a year ago. The employment rate for whites was also unchanged at 59.5% from last month but is down from the year-ago level of 59.6%.

Thus it is a fair conclusion that the jobs picture did not change significantly for Whites on the month, but decline from a year ago in the unemployment rate is largely due to the fall in the participation rate.

The unemployment rate for Blacks rose to 16.2% from 16.1% in March, and is above the 15.5% a year-ago level. The true picture, though, is much worse than that. For the month, the participation rate for Blacks fell to 61.1% from 61.5%, so the monthly deterioration much worse than it appears. A year ago, the participation rate was 62.7%. Thus, the employment situation for Blacks over the last year has deteriorated noticeably.

The employment rate for Blacks fell to 51.2% from 51.5% in April, and is down from 53.0% a year ago. The unemployment rate is 102.5% higher than for Whites, and the employment rate is 13.9% lower (51.2% vs. 59.5%). The participation rate is just 4.9% lower. A year ago, the participation rate was 4.0% lower and the employment rate was 11.1% lower. A year ago, the unemployment rate for Blacks was 76.1% higher than the White unemployment rate.

For Hispanics, the unemployment rate in May rose to 11.9% from 11.8% last month but down from 12.4% last year. The true picture was a bit more downbeat than that. The participation rate fell to 66.3% from 66.6% in April and from 67.7% a year ago. The employment rate slipped to 58.4% from 58.7% last month. A year ago the Hispanic employment rate was 59.3%.

The participation rate by Hispanics is actually 2.5% higher than for Whites, but a year ago it was 3.7% higher than for Whites. The employment rate is 1.8% lower, while a year ago it was 0.5% lower than for Whites. Over the last year the unemployment rate has moved from being 40.9% higher than the White unemployment rate to 48.8% higher than for Whites.

Stay in School

The unemployment rate for high school dropouts rose to 14.7% from 14.6% in April. It is down from the year-ago level of 14.9%. The monthly deterioration is actually worse than it appears, but the year-over-year decline is an illusion. The participation rate amongst dropouts fell to 45.1% from 45.5% last month and from the 45.7% level of a year ago. The percentage of high school drop outs actually employed fell to 38.5% from 38.9% last month and is down from 38.9% a year ago.

I should note here that the numbers by level of education refer to people over age 24, and so are not directly comparable to some of the other numbers. The overall unemployment rate for people over 24 years old was 7.8%, up from 7.6% in April but down from 8.3% a year ago.

Just finishing high school or getting your GED substantially increases your odds of having a job. The unemployment rate for high school grads (with no college) fell to 9.5% from 9.7%. in April. It is down from the 10.8% rate a year ago. In all three months, the level was still far below that for dropouts.

This month the unemployment rate for dropouts was 54.7% higher than for those who at least finished high school. The participation rate for high school grads was unchanged at 60.4% from a month ago. A year ago it was 61.9%. Thus, the improvement from last year is somewhat of an illusion.

The employment rate for high school grads was also unchanged from last month at 54.6%, but is down from 55.2% a year ago. Note that the participation rate and the employment rate are much higher for high school grads than for dropouts. The payoff from graduating is thus actually much higher than the unemployment rate differential (as big as it is) would indicate.

Those who went to college but did not finish or only got an Associates Degree, had an unemployment rate of 8.0%, up from 7.5% in April, but down from 8.3% a year ago. The participation rate for Associate Degree holders was unchanged at 69.7% but is down from 71.0% a year ago.  The employment rate dipped to 64.1% from 64.5% in April but is down from the 65.1% level of a year ago.

There is still a sizable payoff in terms of employment prospects from going to Community College, although the difference is not quite as dramatic as the payoff from simply graduating from high school. The high school grad unemployment rate is 18.7% higher than that of the Junior College set.

For those who stay in school to get their BA (or higher), the unemployment rate was unchanged on the month at 4.5% from 4.4% in March, and is down from 4.6% a year ago. The participation rate rose to 77.5% from 77.0% in April, and from 77.2% a year ago. The percentage of college grads with jobs was rose to 74.0 from 73.5% last month and from 73.7% a year ago.

The following graph (from this source) is unfortunately not updated with the May data, but shows the long-term history of unemployment by level of education. While the level of unemployment is always higher the less education one has, the relatively uneducated really get hit hard when the economy turns south.



Better for First-Timers

The unemployment rate for people 20-24, those who are just entering the full-time workforce was 14.7% down from 14.9%, but up from 14.6% a year ago. This decline is good news.

If these people cannot get jobs, they tend to remain living with Mom and Dad. This slows the rate of household formation, and hence the demand for housing. That makes it difficult for the economy to absorb the huge housing inventory overhang.

Normally housing is the locomotive that pulls the economy out of recessions. That locomotive is still derailed, and it is the principal reason that this recovery has been so sluggish. The improvement in the unemployment rate for these folks is good news, but the level is still extremely problematic.

The unemployment rate for those a bit older, the 25 to 34 year old cohort, which is the prime age for first time home ownership, fell to 9.3% from 9.5% last month and down from 10.4% a year ago. Lowering the unemployment rate amongst these people will be a key to resolving the housing problem.

We are making progress, but still have a long way to go. Several studies have shown that not being able to get a job right after finishing school hurts people not only short term, but the effects last their entire working career.

Where the Jobs Are (and Are Not)

The private sector actually added more than the total number of jobs again this month. State and local governments laid off 30,000 workers, and have trimmed their payrolls by 291,000 over the last year.

Actually it is mostly at the local government level where the declines are occurring. Local government employment was down by 28,000 on the month, and is down by 267,000 from a year ago. The number of state employees was down 2,000 on the month and is down by 24,000 over the last year. 

In looking at the effectiveness of the stimulus program from the Federal government, one should keep in mind the massive anti-stimulus effect of budget cuts and tax increases (mostly budget cuts) at the state and local levels of government. Federal Government employment was up 1,000 for the month but is down by 572,000 over the past year (mostly due to the hiring of temporary Census workers last year).

Within local government, education jobs were down by 17,500 for the month and are down by 150,800 over the last year. Given the huge disparity in the unemployment rate between the uneducated and the highly educated that I discussed above, one has to seriously question the wisdom of laying off so many K-12 teachers.

Seriously, people worry about the burden that we are putting on our children due to the increase in the Federal Debt. Just how do we expect them to bear that burden if most of them are illiterate and innumerate? How are we going to compete in the future against countries that actually think it is a good thing to educate their future workforce?

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